Re Keysborough Blue Danube Soccer Club [2003] VSC 119 (24 April 2003)

Supreme Court of Victoria|2003-04-24|Before: ASHLEY J

Trusts - application for approval of arrangement under s. 63A, Trustee Act 1958 - whether persons within the description in sub-s. (1)(b) - whether proposed arrangement otherwise satisfied sub-s. (1) - extent of variation from original Declaration of Trust - benefit - exercise of power under ss. 48 and 51, Trustee Act 1958.

By originating motion filed 18 December 2002 the plaintiffs, 10 in number, sought the following relief:

"3. Pursuant to section 48 of the Trustee Act, alternatively pursuant to Order 54 of the Rules of the Supreme Court, that the following New Trustees be appointed, namely Kornelia Toth, Julius Olasz, Alex Horvath, Janos Zdimirovic and Laszlo Papadopulos (`the new Trustees') in addition to the current Trustees of a Trust for the benefit of the members for the time being of Keysborough Blue Danube Soccer Club (`the Trust') instituted pursuant to a trust Declaration made the 20th July 1992 (`The Trust Declaration') in respect of the whole of the land situate at and known as 185 Chapel Road, Keysborough, Victoria, and being more particularly the whole of the land now comprised in Certificate of Title Volume 9354 Folio 605 (`the Property'). 4. Pursuant to Section 51(1) and (2)(a) and/or (o) and Section 58(3) of the Trustee Act 1958, and pursuant to Section 58(1) of the Transfer of Land Act 1958, the Property be vested in the said New Trustees and the Current Trustees, namely Sandor Varga, Josef Radoc, Josef Biro, Mihaly Gyarmati and Mihaly Farkas, jointly. 5. Pursuant to Section 63A of the Trustee Act 1958, that the Trusts contained in the Trust Declaration be varied in accordance with the proposed Deed of Variation and Declaration of Trust attached hereto and marked "A". 6. Pursuant to Section 63 of the Trustee Act 1958, that the Trustees be authorised to deal with the Property in accordance with the proposed Deed of Property Development attached hereto and marked "B", being a Deed between the Trustees and an Incorporated Association known as Kek Duna & Delvideki Magyarok Szovetsege Inc AOO42951F. 7. Pursuant to Section 58(1) of the Transfer of Land Act 1958, the Vesting Order made by the Court in respect of the Property be served upon the Registrar of Titles to enable the Registrar to record the Order in the relevant part of the Register."

There is an unincorporated association known as the Keysborough Blue Danube Soccer Club (`the Club'). Apparently it has been in existence for quite some years. It presently has in the order of 68 members[1]. Its home ground and other facilities are at Keysborough, in the land comprised in Certificate of Title 9354 Folio 605. That land is the subject of a declaration of Trust dated 20 July 1992, by which document five persons declared that they held the land on behalf of the Club. All of them, it seems clear[2] were members of the Club. They are the first five plaintiffs in this proceeding.

The land has a present value of about $650,000. The only other present asset of the Trust is a very small amount at bank. The subscriptions of members of the Club have in the past been used in part to meet expenses in respect of the property.

The Trustees think it desirable that new social rooms and change rooms be erected on the property. Neither the trustees nor the Club have the necessary funds.

The Club has always had a strong connection with the Hungarian community in Melbourne. In some sense it exists for the benefit of the community.

There used to be a Company Limited by Guarantee, named Association of Southern Hungarians ("the Company"). Its members were persons of Hungarian descent. Its objects related to enhancing the wellbeing of such persons resident in Melbourne - as by preserving Hungarian traditions and customs, the Hungarian language, assisting those in need and helping with the assimilation of persons of Hungarian descent into the Australian way of life.

The Company was incorporated in 1971. It was deregistered on 23 September 2002. At the time of its deregistration it had 86 members[3]. Its assets, largely money at bank, then totalled about $389,000. Its then directors wanted its members to have a social club and facilities; but it owned no land on which to erect the same.

The last directors of the Company were five in number. Four of them are the sixth to ninth plaintiffs in this proceeding.

There were discussions at least in 2001, perhaps before - between the trustees and the directors of the Company. It was thought desirable by both sides that the Company and the Club, in substance, amalgamate; that to do so would facilitate the desires of both organisations, to the betterment of each of them.

The discussions led on to the trustees convening a meeting of financial members of the Club on 12 April 2002. It was then unanimously resolved that the Club change its name to "Keka Duna & Delvideki Magyarok Szovetsege", which translates to "Blue Danube & Association of Southern Hungarians". It was also unanimously agreed that the number of Trustees of the Trust should be increased to 10. It was the intent of the meeting that all club members should become members of a new incorporated association bearing the altered name of the Club, and that the new incorporated association should be the entity whereby the Club and Company in substance amalgamated. It was evidently the intent also that five members of the Company should fill the newly-created positions as additional Trustees.

The discussions to which I referred a moment ago also led on to a meeting of members of the Company. That meeting was held on 14 December 2001. It was resolved to incorporate a new association under the provisions of the Associations Incorporation Act 1981, that the incorporated association should bear the name "Keka Duna & Delvideki Magyarok Szovetsege (Blue Danube & Association of Southern Hungarians)", that the new incorporated association amalgamate with the Club, all members of the Club becoming members of the association, that directors of the Company or their nominees become Trustees of the Trust, and that funds of the Company be expended on the erection of a new social rooms and facilities on the land the subject of the Trust.

In performance of the matters resolved by the members of the Company:

(a) On 12 May 2002 the Company successfully applied to change its name to Blue Danube & Association of Southern Hungarians (Keka Duna & Delvideki Magyarok Szovetsege).

(b) On 19 August 2002 an association (the Association) was incorporated under the provisions of the Associations Incorporation Act by the name Keka Duna & Delvideki Magyarok Szovetsege (Blue Danube & Association of Southern Hungarians).

(c) The Company was deregistered and its assets were vested in the association.

(d) The rules of the association provided that its initial membership should consist of the members of the Company and the Club "consequent upon the said company and the said unincorporated association becoming amalgamated", those persons becoming members without the necessity of either completing a membership application form or being appointed for membership or paying any entrance fee[4].

(e) The members of the Company in fact became members of the association.

The purposes of the association, as revealed by its Statement of Purposes[5] are said to be substantially identical with the purposes of the former company, save that there has been added reference to the conducting of sporting, social and cultural events and competitions, and to the establishing of teams for sporting purposes. Further, although no constitution of the club was placed before me, it is possible to conclude, and I do conclude, that the purposes of the association are substantially the same as the purposes of the club.

The governing body of the association consists of its officers - a president, vice-president, treasurer and secretary - and four other members. It might reasonably be anticipated, in light of the size of the memberships of the Club and the former Company that the governing body of the association will comprise persons associated with each of those former entities. Indeed, it seems to be the case that this anticipation has already been realised[6].

The current Trustees, in essence on behalf of the Club, and the Association executed a Deed of Property Development on 16 December 2002. It provided for the erection of buildings on, and use of the property by, the association.

The agreement was made in anticipation of the Court acceding to an application to increase the number of trustees of the Trust and to otherwise vary the Declaration of Trust - those matters being of key importance to the amalgamation proposal. It provided a concrete framework for the development and use of the property.

So much for the circumstances of the matter as they were first placed before me. Before going on I must refer to a change in the situation which developed out of debate between counsel for the plaintiffs and the Bench.

On consideration, it could not be doubted that the Declaration of Trust dated 20 July 1992 was a settlement of land for the purposes of s. 40(2) of the Trustee Act 1958 ("the Act"). In consequence, unless an exception set up by s. 40(3) applied, the number of trustees could not exceed four, and where a greater number was named, only the first four named should be the trustees. Further, if the Declaration of Trust was varied as was then proposed, it would remain of the same character. Unless an exception applied, the inhibition on the number of trustees to which I referred a moment ago would remain.

Counsel for the plaintiffs sought to persuade me that this was a case of land vested in trustees for charitable purposes. He contended that the Trust was intended to benefit an identifiable section of the community. I indicated that I was unpersuaded. I referred to what was said by Lowe J in Re Income Tax Acts (No 1)[7] in a passage approved and adopted by the High Court in Thompson v Federal Commissioner of Taxation[8]. I referred to the limited circumstances in which trusts pertaining to the promotion of sport have been held to be for charitable purposes[9].

In the event, the hearing of the matter was adjourned for a period; and in that period it was resolved by all the interested parties, in substance, that the earlier proposed arrangements should proceed, but with the number of trustees being limited to four, of whom two should represent the interests of the Club and two the interests of the former company. An amended Deed of Variation and Declaration of Trust ("the Amended Deed") was submitted for my consideration. It had been executed by the five existing trustees (of whom three indicated an intention of resigning), and two persons who were to assume office as trustees, they having been appointed at a meeting of the Association.

I have referred a number of times to thoughts and actions of the trustees: see paragraphs 4, 9, 10 and 15. They were the thoughts and actions of the five persons who declared the Trust in 1992. The consequence of s. 40(2)(a) is that only the first four persons named were constituted the trustees. I do not take that to mean that the thoughts and acts of the first four were invalidated by the fact that the fifth person joined in.

In the circumstances which I have now fully described, the plaintiffs seek, importantly, an order of the Court under s. 63A of the Act approving an arrangement to vary the trusts, enlarge the powers of the trustees, and provide for the better management of trust property. The arrangement which the plaintiffs propose is in form a variation of the trusts, that variation being specified in the Amended Deed. It was the submission of counsel for the plaintiffs that exercise by the Court of its admittedly broad power to authorise dealings with trust property under s. 63 of the Act would not suffice.

No order could be made under s. 63A unless it was established that it would be for the benefit of, in this case, persons described in sub-s. (1)(b). Counsel for the plaintiffs submitted that possible future members of the Club in the life of the Trust met that description. Upon the question whether the order sought would be for the benefit of such persons, counsel for the plaintiffs made a considerable number of criticisms of the Declaration of Trust, some at least of which were of substance. He submitted that approval by the Court of the proposed Deed of Variation and Declaration of Trust would remedy the present deficiencies and so advantage such persons.

In my opinion the Trust as presently constituted has a vesting date of 20 March 2071. That, I think, is the purpose of paragraph (a) on page 3 of the Declaration of Trust. The date stated was some 80 years after the date of the Deed.

The Trust constituted in 1992 was a trust for the benefit of "the Club". The Club could be no more than its members from time to time.

The Trust having an intended long period of life, and there being the potential for persons to join the Club throughout the life of the Trust, it can reasonably be supposed that the conduct of the Trust could impact upon persons not yet members of the Club.

A question was raised whether it could be said that possible future members of the Club were persons falling within s. 63A(1)(b) of the Act. Some of those persons might not have been born at the time when this proceeding was commenced; nor be born for years to come. Counsel submitted that such persons may or will become entitled to an interest in the assets of the Trust. He accepted that the effect of Knocker and anor v Youle and anor[10] is that persons already having a contingent interest in the Trust property are to be excluded from the operation of sub-s. (1)(b); and that such persons would include persons who might become members of the Club in the future. But he submitted that the criticism of that decision in an article by J.G. Riddall[11] was well-founded.

Ford & Lee in their Principles of the Law of Trusts say[12] that "a principal object of the legislation is to enable the Court to approve an arrangement for the variation of a trust on behalf of persons unable to give approval themselves". That proposition should readily be accepted. The exception to the operation of sub-s. (1)(b) is quite consistent with that principle; for in the circumstances there envisaged it will be for persons fitting the description or class to themselves consent or refuse consent to the proposed variation of trust. The absent potential next of kin to whom Buckley J referred in Re Suffert's Settlement[13] were persons who fell within the exception.

It seems to me, with respect, that to construe the opening part of sub-s. (1)(b) to exclude possible future members of the Club, a fortiori future members as yet unborn, on the footing that such persons have a contingent interest under the trusts and so could not meet the description of persons who "may become entitled", would do serious damage to the important object of the section to which I referred a moment ago. I am not prepared to treat possible future members of the Club, at least possible future members not yet born, as persons so excluded. I should add that such persons could not fall within the exception to sub-s. (1)(b).

The object described by Ford & Lee apart, it seems to me that Mr Riddall was correct in saying that Warren J's acceptance in Knocker of the correctness of the decisions in Suffert and Re Moncrieft's Settlement Trusts[14] did not sit easily with his Lordship's reasoning. I consider also that Mr Riddall made a sound point when, having posed the question what kind of interest is held by a person who may become entitled on the happening of a future event, he answered that question by saying that such a person holds a contingent interest. I further note that the learned authors of Jacobs' Law of Trusts in Australia[15], adverting to the phrase "any person who would be of that description", say "(ie, a contingent beneficiary)"; though without citation of authority.

I am satisfied, then, that this application is property brought on behalf of persons fitting the description in sub-s. (1)(b).

I should next note that, the members of the Club having unanimously voted in favour of the proposed arrangement, and all the existing trustees and the proposed new trustees being parties to the proceeding, no occasion arises for my giving a direction under s. 63A(3). Moreover, the members having so voted, the problem which arose in Suffert does not arise here.

That takes me to the questions whether the Amended Deed is an arrangement within sub-s. (1); and whether it satisfies the proviso to that subsection.

The principles governing the answer to the first question are clear enough. The Court is given what has been described as a "very wide and, indeed, revolutionary discretion"[16]. In terms, it embraces both administrative matters and variations in the beneficial interests. Whilst the discretion is wide, it is a discretion to vary, not to resettle.[17] The dividing line, it has been said, is not easy to discern. Guidance was given by Megarry J in Re Ball's Settlement[18] as follows:

"If an arrangement changes the whole substratum of the trust, then it may well be that it cannot be regarded merely as varying the trust. But if an arrangement, while leaving the sub-stratum, effectuates the purpose of the trust by other means, it may still be possible to regard that arrangement as merely varying the original trusts, even though the means employed are wholly different and even though the form is completely changed."

In giving approval, the Court must be satisfied about the arrangement as a whole. An important fact is whether the arrangement is consistent with the settlor's general plan[19]. The settlor's intention and desire is to be ascertained by reference to the existing disposition.

Applying the considerations which I have mentioned to the present case, I am satisfied, though the case is towards the periphery of what is permissible, that the proposed arrangement is within the confines of sub-s. (1). I should refer to some aspects of the matter.

First, important aspects of the proposed arrangement are that the land will be held on trust for the incorporated association and not the Club; that the Association's purposes are not strictly sporting; and that the Association can be expected to have members whose interests are social rather than sporting. It seems to me, nonetheless, that the substratum of the Trust will remain the same. Essentially the trustees will hold the land on trust for an entity with purposes which are significantly directed to the fielding of a soccer team or teams by persons of Southern Hungarian descent. Further, it should not be supposed that the members of the Club in the past played their soccer and went home without any other social interaction.

Second, a number of the proposed variations to the Declaration of Trust are of a character such that, if the Deed was not varied, recourse could in any event be had to the Court - perhaps on multiple occasions - to achieve similar outcomes.[20] Variations of that kind should certainly be considered to be within the intention of the settlors.

Third, the proposed reduction in the number of trustees is dictated by the requirements of s. 40 of the Act. It must be inferred from the fact of the settlement that the settlors intended the Trust to be lawfully constituted and continued. The identity of the trustees hereafter, I should add, will reflect the working out of the agreement reached between the existing trustees, the members of the club and the old company.

Fourth, the proposed arrangement will operate to give the trustees rights, powers and projections which are not conferred by the 1992 Deed; or which are conferred in abbreviated form. In this connection see the matters dealt with by cll. 2.1, 2.9, 2.10, 4 and 5 of the Amended Deed. I do not consider that those proposed variations alter the essential substratum of the existing trust. I should particularly mention cll. 2.1, 4 and 5. The power in the trustees to appoint other trustees, see cl. 2.1, is confined by the requirement that any appointment be confirmed by resolution of members of the association. The powers of the trustees conferred by cl. 4.2 - 4.9 are confined by reference to cl. 4.1. The power conferred on the trustees by cl. 5 is confined by paras. (a) and (b).

Fifth, the proposed variations deal with a number of mechanical matters which are necessary if the Trust is to operate effectively. I refer, for example, to cll. 2.3 - 2.8 and 3. Such variations should readily be considered to be within the settlors' intention as determined in the proper manner.

I turn to the question of benefit. In my opinion it is quite clear that the proposed arrangement is to the benefit of persons who might join the Club in the long period until the Trust vests. I should mention two matters. First, if the arrangement is approved, the Club, though in a different legal entity, will survive and has prospect of flourishing - with a larger current membership and better facilities. Absent approval, it may be doubted whether the Club could survive. Second, the proposed arrangement will enable the Trust to be much better conducted and, with more certainty. The likely or at least possible need for repeated recourse to the Court, recourse which must be at cost to the Trust and thus, ultimately, at cost to the beneficiaries of the Trust, will be obviated.

I shall, then, generally approve the proposed arrangement under s. 63A of the Act. One aspect of that arrangement is that, consonant with s. 40 of the Act, there are to be four trustees.[21] Three of the existing trustees having indicated an intention of resigning upon two new trustees "being properly appointed" the Court is now asked to exercise its power under s. 48(1) of the Act to order that Messrs Julius Olasz and Janos Zdimirovic be appointed new Trustees of the Trust. I consider that it is expedient to make such an order.

Upon an exercise of power under s. 48(1), the Court may make a vesting order under s. 51 of the Act. I shall make such an order, vesting the trust property in the two continuing and the two new trustees. It will be necessary for that order to be served on the Registrar of Titles so that it may be appropriately recorded.

I noted earlier that the originating motion seeks an order under s. 63 of the Act authorising the trustees to deal with the property in accordance with the Deed of Property Development to which I have referred. I will not make such an order. It is unnecessary to do so having regard to the powers conferred on the trustees by the Amended Deed.

There is one matter more which I should mention. I have said that according to the Amended Deed there are to be four trustees.[22] One clause is not wholly consistent with that arrangement. Clause 2.3 opens with the words "If at any time there is more than one Trustee..." I note that the Trustees are empowered to alter the Deed: see cl. 5. I consider that they should exercise their power to amend cl. 2.3 to read: "The Trustees shall act jointly...". The alternative is that I hold up approval of the arrangement pending a further amended Deed being made. Counsel for the continuing and new trustees having undertaken that his clients will procure the appropriate amendment, I consider that such an alternative course is not necessary.

[1] Based upon the contents of exhibit KT/JR3 to the affidavit of Kornelia Toth and Josef Radoc sworn 16 December 2002 (the December affidavit).

[2] I refer again to Exhibit 3 to the December affidavit.

[3] There is evidently an error in paragraph 22 of the December affidavit.. It refers to the number of members at the time of registration, rather than at the time of the deregistration.

[4] Part of Exhibit 8 to the December affidavit.

[5] Part of Exhibit 8 to the December affidavit.

[6] See paragraph 2 of the affidavit of Kornelia Toth and Mihaly Gyarmati sworn 7 February 2003 (the February affidavit).

[8] [1959] HCA 66; (1959) 102 CLR 315 at 323; see also Stratton v Simpson [1970] HCA 45; (1970) 125 CLR 138

[9] See Jacobs' Law of Trusts in Australia, 6th Edition, paras. 1032 and 1049

[16] Re Steed's Will Trust [1960] Ch 407 at 420-421 per Evershed MR

[17] See, eg, Allen v Distillers Co (Biochemicals) Ltd [1974] QB 382, cited in Jacobs, supra, at para. 1707

[18] [1968] 1 WLR 899 at 905, cited in Hanbury and Maudsley's Modern Equity, 10th Edition at pp. 538-539

[19] Hanbury and Maudsley, supra, at 539

[20] I refer, for instance, to the Court's powers under ss. 48, 51 and 63 of the Act.

[22] Clause 2.1 prescribes that matter. See also, consistently, clauses 2.5, 2.7, 3.3.

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